Should it take ten years to hop on the property ladder?

A survey has found that first-time buyers need to save up for an average of eight years before they can afford a deposit, compared to just one year in 1995. So what’s behind the drastic increase?

Research from Barclays has found that it took people just one year to save up for a deposit in 1995, with savers needing just 5% of the property price on average. Fast-forward 17 years, and a deposit will take eight years of saving and will cost 20% of the property price, causing many to turn to the Bank of Mum and Dad for help.

This research doesn’t come as much of a surprise. My parents’ generation may have been able to buy their first property just a few years after leaving home, but for my age group, this seems as much a part of history as flared jeans and Chopper Bikes.

Decades for a deposit

These days – soaring rent prices, lack of job security and increasing transport costs often make it difficult for savers to put aside any money at all. Our study last year found the amount we spend on anything other than essentials is at its lowest in 20 years. On top of this, housing costs take up 28% of our budget compared to just 14% in 1965.

I live in London, which means it’ll take me even longer to save up for a deposit. Aspiring home-owners have to save for an average of ten years to get on the ladder in the capital, in stark contrast to just 11 months in 1995.

Those looking for a property in the North West and Wales have the lowest average saving time, with a wait of four years and 11 months. So why does it take so long to save in London? Analysts believe it’s because many underestimate how much a deposit will actually cost.

The reality is that a deposit on a London property will often come in at a hefty 20% of the value, or £70,000 on average. That’s almost double the deposits in Reading – second most expensive area to buy in the UK. According to research by mortgage provider Castle Trust, deposits in Reading come in at £39,789 on average.

The future’s bright(er)

Eight years is a long time to wait to get on the ladder, with many of us turning to our families for help. In fact, Barclays found that 60% of Brits ask their mum and dad for financial help – but only half of them actually get it.

But there is some good news. The figures are better than they were at the height of the housing crisis in 2009, when first time buyers faced a 10-year average wait. In addition, a recent Which? Money survey showed that high loan-to-value mortgage deals: 90% and 95%, have started to appear again. Meanwhile, government schemes such as NewBuy and FirstBuy are helping to provide an alternative for those who can’t get family help.

Being in my mid-twenties, I think I should probably start saving now. After all, the average age of a first-time buyer is now 35, compared to just 24 in the 1960s. Did it take you long to save for your first property? If you’re still saving, do you have far to go?

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7 comments

Perhaps Which? the magazine could relocate to a cheaper part of the country to help reduce the demand for property in London and also allow the journalists and off ice staff the opportunity to buy more cheaply.

There are plenty of flats under £100K in Hereford and I imagine office rents are cheaper also. Or is there a fear that not being in London hinders job mobility?

Well said Diesealtaylor. You can get a four-bedroom house for £120,000 where we are in Norfolk – it’s only ninety miles from London [but with the fabulous city of Norwich on the doorstep that's not important], has a good train service, excellent schools, the lowest crime rate, and the best all-round weather in the country.

It begs the question why the British are so keen to get on the property ladder, and the answer is that everyone expects to reap the rewards in capital growth through house value. The “bank of Mum and Dad” is just entrenching social and economic divisions, by accruing these benefits to those who already have the cash anyway …

By the way, More or Less on Radio 4 shot down the ‘first time buyer is 35+’ myth in one of December’s shows … I was listening to the podcast last night!

Renting can be very expensive. Some people don’t look after rented property, as anyone who rents out property knows only too well. That pushes up the cost of renting. If you buy you can do your own repairs and improvements, rather than having someone else do them, which can save money.

Obviously there are the risks of redundancy, long-term illness and repossession but I see the level of home ownership in the UK as encouraging.

1st time buyers should perhaps be helped onto the ladder by stages 1. buy the land (from council pool) and when say they have paid £25000 of the cost. 2.Then get a morgage to build. Plots to be of a mininmum size, not postage size dimensions. Have several basic designs and with a Friendly Society or friendly council put it out to tender?

Many of us have struggled to buy our first house – saving a deposit and then having at least the first few of years of crippling repayments. But I would rather own than rent – not for the capital gain but for the security.
We – the purchasers – have help drive up house prices by regarding them as an asset that cannot fail to increase in value, assisted by the lenders who felt the same, so issued, in hindsight, silly loans that fuelled the spiral. We now see how wrong that all was, and thank goodness some sense has returned. At least relatively stable house prices give new potential buyers the opportunity to save a deposit before prices outpace them.
Any schemes that make house buying easier than in a free market tends to distort that market and drive the prices of cheaper houses up again. Hopefully mortgages offered at a fairly high percentage of the property value, coupled with more loan money available, could allow people with more modest deposits onto the housing ladder. Make sure these loans apply to all properties, and not just to selected new developments from a small group of the major housebuilders.

In an odd way, the government’s refusal to raise the stamp duty land tax thresholds in line with house price inflation has helped stabilise the whole market. It effectively caps the price of enrty level property as, in order to sell a larger house, you have to accept that [London excepted] people will not pay more than £250,000 for a standard 3-bed semi and that restrains the market both below and above that level.

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